When you start a new business, you have to make a decision regarding how you will approach your financial management. Two basic methods are available to you: cash basis or accrual basis. Although the two methods clash, there are also see some similarities.
Cash basis is an accounting method that counts income only after cash or a check is received and expenses are not counted until they have been paid. This method is the most popular accounting method among entrepreneurs and small businesses.
Accrual basis is an accounting method that counts income when orders are placed or services are requested, regardless of payment being received. Expenses are counted when your request for good or services is fulfilled.
Are you a small business owner who struggles to keep your books balanced? Do you feel like you’re too busy juggling all the other responsibilities of managing the day-to-day operations? If so, you’re not alone. Bookkeeping can be tedious and intimidating, but with the right tips and tricks, it doesn’t have to be a struggle. We share some of our favorite bookkeeping tips for small businesses, so read on and start getting your books in order!
1. Separate Your Personal and Business Expenses
Mixing your personal accounts and business accounts is asking for trouble. Skip any confusion and create separate bank accounts. Having a dedicated business account provides a clearer picture of your business cash flow allowing you to track expenses more easily. Solely using credit cards for all business transactions is a great way to stay on top of expenses as cash payments can easily be overlooked.
2. Pay Attention to Receivables
Every business likes to get paid but managing those payments isn’t as much fun. Marking an invoice as paid when payment is received seems easy, but all too often customer payments are left to reconcile at a later date. It’s important to keep track of your transactions as they happen. Applying customer payments weekly will save you time and money – and a big headache come tax time.
3. Pay Yourself a Salary
While paying yourself may not be the first thing that comes to mind as you’re building a business, if your business earns enough money, it should be. Paying yourself a salary is an excellent way to keep your business and personal life separate and keep your books in order. Rather than having business pay your personal expenses, have them write you a check that is deposited into an account just for those payments.
4. Log Expense Receipts
The importance of keeping business receipts cannot be overstated, as they help you keep accurate records for your taxes and lend credibility to any tax reporting. Whether it’s buying dinner for a client or paying to create a new logo for your company, all purchases should have some type of receipt with them so you can keep an accurate record of all business expenses.
5. Hire a Professional
Too many small businesses struggle with the day-to-day tasks of keeping their books, and it’s a problem that can be easily avoided. Your business requires your full attention as you grow it into something amazing—outsource these tedious jobs so you have more time to focus on what really matters, making money!
As a small business owner, you have to be mindful of your accounting and finances. These tips will help make bookkeeping less daunting and ensure that your business is on the right track financially.
There are many different options for accounting and it can be difficult to decide which is the best for you or your business. You can hire an accountant to do your books or you can use accounting software. Each has its own pros and cons, and it helps to understand them before making a decision. In this blog post, we will discuss the pros and cons of hiring an accountant vs. using accounting software. Hopefully it will help you decide which option is right for you!
Hiring An Accountant
Hiring an accountant is a good option for businesses that don’t have the time or resources to do their own accounting. An accountant can help you with everything from bookkeeping to tax preparation. They will keep your books in order and make sure you are compliant with all applicable laws. Hiring an accountant also gives you someone to rely on for advice and support. A main benefit of hiring an accountant is the time it saves. You can focus on other aspects of your business and personal life instead of working on your finances for hours on end.
However, It can also be difficult to find an experienced accountant who is knowledgeable about your specific industry. Additionally, you are limited to the services that the accountant offers. If you need help with something that the accountant does not offer, you will have to find someone else to help you.
Using Accounting Software
Using accounting software is a good option for businesses that want to do their own books but don’t have the time or resources to hire an accountant. The software gives you access to all of your financial information in one place, which makes it easier for you to keep track of what’s going on with your business and make decisions based on that information.
However, using accounting software can be very time consuming and difficult to learn. You need to be able to understand financial statements in order to use the software effectively. If you don’t have any experience with accounting, it will take some time to learn how to use the software and understand what the statements mean. Additionally, you are responsible for entering all of your financial information into the software, which can be a time-consuming process. If you find yourself struggling with the software, it is wise to consider hiring an accountant.
In conclusion, both hiring an accountant and using accounting software have their own pros and cons. It is important to weigh the pros and cons of each option before making a decision. If you use accounting software, make sure that the software is easy to learn and use before purchasing it. This will help ensure success!
If you hire an accountant, make sure that you hire someone who is knowledgeable about your industry and has experience working with businesses like yours. We pride ourselves at Motl Accounting on helping various types of businesses and individuals with their taxes. Whether you need accounting or payroll services, we can help. The most important factor when it comes to your finances is peace of mind and we offer that to our clients.
Need help with your business finances or personal taxes? Contact one of our experienced professionals at our West Dundee location to get the help you need.